Seventh Annual Global Shared Services Conference Deploying Shared

Seventh Annual Global Shared Services Conference Deploying Shared Services in Government Operations Steve Hodgson, Head of Shared Services Her Majesty’s Prison Service (HMPS) Copyright © 2006 Accenture All Rights Reserved. Accenture, its logo, and Accenture High Performance Delivered are trademarks of Accenture.

Contents 1. HMPS Overview 2. HMPS Rationale for Shared Services 3. HMPS Approach to Support Function Modernization 4. HMPS Lessons Learned 5. Key Challenges of Implementing Central Government Shared Services 6. The Future – Sector Strategies and Plans 7. Summary Copyright © 2006 Accenture All Rights Reserved. 2

1. HMPS Overview • Mission – Protect the public – Reduce re-offending • 130 public sector prisons in England Wales • 48, 000 employees • 77, 000 inmates • c. £ 2 billion per annum cost base Copyright © 2006 Accenture All Rights Reserved. 3

2. HMPS Rationale for Shared Services Why do Shared Services? • Cost of service down – Justifies investment in existing value management systems • Service standards up – What most people in the enterprise want – Those who care about cost down soon won’t if deterioration in service impacts operations • Enabler for “core business” performance improvement – What the stakeholders want and the real reason for Shared Services • Start as “Cost Reduction Programs” but are really about “Service” and “Change” Copyright © 2006 Accenture All Rights Reserved. 4

2. HMPS Rationale for Shared Services HMPS Goal The Radical Improvement of HMPS Support Functions delivering the Value committed to in the Business Case. We will know we have succeeded when the NPV has been delivered and our benchmarking shows us to be established on an improvement “flight path” towards in the Upper Quartile on Cost, Customer Satisfaction and Shared Service Employee Satisfaction. Copyright © 2006 Accenture All Rights Reserved. 5

2. HMPS Rationale for Shared Services HMPS Benefits • Cost of service (NPV £ 102 million) – Reduced employment costs in support functions – Reduction in Procurement unit costs • Improved service (not quantified) – Employee experience – Management information • New services (“Business Partners”) – Improved business performance through improvement in performance management of assets, resources, information and people Copyright © 2006 Accenture All Rights Reserved. 6

3. HMPS Approach to Support Function Modernization Phoenix Program History • Started as three separate programs – HR Shared Services – Finance System Replacement – New Procurement Operating Model • Started at different times with different sponsors • Brought together into: – One Shared Service Center – One IT Platform – One Set of Implementation and Operating Costs – One Sponsor Copyright © 2006 Accenture All Rights Reserved. 7

3. HMPS Approach to Support Function Modernization Phoenix Program Work Streams – Service Solution Design • Finance – AR Services – Banking Services – Record to Report Services – Expense Services • Procurement – Purchase to Pay • HR – Employee Record Administration – Resourcing – Performance Management – Training – Pay Copyright © 2006 Accenture All Rights Reserved. • Customer Contact Services – Query Resolution – Document Handling – Knowledge Management • Systems Administration – User Administration – Key Data Administration – Systems Development 8

3. HMPS Approach to Support Function Modernization Phoenix Program Work Streams – Others • Technology – ERP – Workflow, Telephony, Document Management • Building • People • Business Continuity Management • Process Improvement and Quality Management • Business Performance Management Systems • Customer Service Management and Business Change Management • Project Management and Benefits Tracking Copyright © 2006 Accenture All Rights Reserved. 9

3. HMPS Approach to Support Function Modernization IT System Services Procurement Services (AP) HR Services Finance Services Customer Contact Services Shared Services Blueprint Architecture Business Performance Management System Customer Service Management System Facilities Business Continuity Management System Information Technology Process Improvement and Quality Management System Service Delivery Lines Copyright © 2006 Accenture All Rights Reserved. Service Delivery Enablers 10

3. HMPS Approach to Support Function Modernization HMPS Shared Services Implementation – Key Milestones Milestone Date Oracle Finance Implemented Apr 2005 I-Procurement Implemented Jan 2006 Finance and Procurement Shared Services Implemented Apr 2006 HR Shared Services • Personnel Administration • Professional Services Oct 2006 Q 3/Q 4 2007 Copyright © 2006 Accenture All Rights Reserved. 11

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4. HMPS Lessons Learned • Functional Silos vs. “End-to-End” Service Solution Design – Duplication – Not “joined up” for the customer • Technology Led vs. Service and Process Led – Existing poor processes on IT – Little service and cost performance improvement • Technology Big-Bang vs. Incremental at Pace – “Hardwire” unproven solutions in – High cost, poor quality, re-work and delay • Inexperienced Resources vs. Proven Track Record – Poor specification of requirement – Learn all lessons the hard way Copyright © 2006 Accenture All Rights Reserved. 14

5. Key Challenges of Implementing Central Government Shared Services Cultural Challenges to Overcome Value Seems To Be Needs To Be Performance Secure more budget than you need and “save” some to be rewarded a bit. Performance indicators set and measured against the market or benchmarks drive significant reward. Partnerships Use force and an adversarial relationship to get what you want from your supplier or customer. Risk/Reward imbalance. Mutual dependency and Trust. All in the same boat each helping deliver the other partners goals. Proper balance of risk and reward. People Treat People as if they are all the same in the name of fairness and diversity and use elaborate processes to do it. Differentiate on the grounds of performance. Use simple processes. Innovation Avoid resistance and blame by getting everyone to agree to a change to the point where there is no risk and little gain. Value of innovation proportional to complexity. Calculated “risk takers” are recognized and rewarded. Value of the innovation based on the impact on performance. Customer Service Support Functions are here to manage the line managers and employees because there is a belief they need it. This breeds a dependant “adult child relationship” with little empowerment. Support Functions purpose is to enable line managers and employees to extract ever more value for the stakeholders from the core business. Copyright © 2006 Accenture All Rights Reserved. 15

5. Key Challenges of Implementing Central Government Shared Services Another Big Issue • For what seems to them very good reasons, a bunch of very bright people: – Are building many Shared Services at great expense to do fundamentally the same thing when many fewer would do the job • When: – They know the capacity to build the numbers that are being planned to the standards required for them to be effective does not exist Copyright © 2006 Accenture All Rights Reserved. 16

5. Key Challenges of Implementing Central Government Shared Services What Can Be Done? • Reduce demand: – Fewer bigger programs – Implemented faster • Increase supply: – Shared Services leadership fast track program – Manage the scarce talent pool – Global sourcing – Proven “Tool Kit” Copyright © 2006 Accenture All Rights Reserved. 17

6. The Future – Sector Strategies and Plans What Are the Sector Strategies and Plans? • Fewer bigger programs: – Better ROI – Less risk from skilled resource • Multiple: – Business unit – Service • Assumptions: – Coherent clusters (e. g. Home Office) – Traditional governance (another layer) – “Convergence” Copyright © 2006 Accenture All Rights Reserved. 18

6. The Future – Sector Strategies and Plans Where is the Home Office? • Two business cases approved: – HMPS – Core Home Office • Governance in place • Proposed convergence plan in place • Likely end game (personal view): – Three (existing and Police) – Employee base of c. 200, 000 Copyright © 2006 Accenture All Rights Reserved. 19

6. The Future – Sector Strategies and Plans The Challenges • Operational framework: – Transition – “To Be” Operating Model • Commercial framework – Investment case – Service price • Governance: – Board of Directors – Service Management Copyright © 2006 Accenture All Rights Reserved. 20

7. Summary • Shared Services in Central Government can deliver: – Modest (when compared to cost base) direct cost reductions – Huge but difficult to attribute indirect benefits in “Core Operations” • The culture is currently not ideal for Shared Services: – Lack of innovation – Dependency • Experience of “getting the job done” in the public sector suggests: – The “Know-How” exists and can be sourced if you are an “intelligent customer” – Currently there is not enough of it around • Multiple Business Unit and Service Line Shared Services are next: – Opportunity to “leapfrog” private sector – Need a better approach to Operations Management, Commercial Framework and Governance Copyright © 2006 Accenture All Rights Reserved. 21